Sunday, December 30, 2007

(Actual balances are in and I will need to edit this post. Short version OAS ended up at $2.024 trillion or $3.3 billion behind Intermediate Cost projections. DI came in at $215 billion or about $6 billion ahead of IC projections (but unchanged for the month). Combined OASDI came in at $2.239 trillion beating IC projections but slightly lagging Low Cost. Most interesting note? 2007 Real GDP came in at 2.2% against a projected 2.6% yet receipts overall managed to come out ahead. This is the third year in a row that Real GDP came in at or below expectations and yet receipts held up.)

Well it's near the end of the year but the Bureau of Public Debt reports with a lag time of a month. So these are the totals as of Nov. 30th.

From the Bureau of Public Debt Nov. 30 Report

OAS Old Age Survivors:$2,014,006,866,559.62DI Disability $215,535,461,216.24

Well in a couple of places I posted that back of the envelope calculations showed that OASDI surpassed year end projections about week two of November. Didn't seem to happen. On the other hand the change from October to November was plus $10 billion for OAS and almost $1 billion for DI so we are looking at a total projection of about $2,240.3 billion by years end, which is to say comfortably above Intermediate Cost and slightly below Low Cost. Which btw is in line with reported GDP and productivity numbers. I am still in the comfort zone.

Update: Well the December job numbers were pretty lousy, then again most of those paychecks wouldn't come until January anyway so shouldn't impact December receipts. 2008 is not shaping up well at all on the Social Security front. On the other hand it is kind of hard to sell private accounts when the country is in a recession. Which of course is the overall point of this whole blog, Social Security solvency tracks the economy much as the stock market does. There just is not enough margin to exploit to give materially better outcomes for private accounts.

Wednesday, December 12, 2007

(Note this has not had its final edit. It is meant to make a point about how robust the system is even when it takes a large hit)Some people are predicting that the next four quarters are going to be totally flat. What happens to our model if we assume a sequence of 2007. 2.6%; 2008 1% then sustained growth at 2.6% while maintaining a pretty pessimistic view of growth in the outyears. Note that 2008 was projected as being the only year at 3.0% in the whole projection, replacing that with a zero is going to hurt. But how much? As it turns out surprising little.

The vertical axis has the Intermediate Cost alternative projections given in the 2007 Report for the years from 2007 to 2024. The horizontal axis represents the numbers as they would have to be adjusted for posited GDP over that same period.------2008--09--10--11--12--13--14--15--16--17--2024

2.6% is a pretty pessimistic number but even in the face of a terrible 0% hit in 2008 would put the system on track to solvency by 2014. It just takes some minor adjustments to growth numbers in the outyears.

The following three posts try to make an attempt to show how the Intermediate Cost alternative would have to be adjusted to keep Social Security 'Crisis' constant, that is to not have the current 2041 date recede further into the future. The methodology assumes that greater than expected growth in any give year can be offset one for one by subtracting equivalent points from future years. In fact due to compounding on the interest on a greater than expected surplus the effect would actually be greater than depicted here, though not significantly over the period presented.

The vertical axis has the Intermediate Cost alternative projections given in the 2007 Report for the years from 2007 to 2016. The horizontal axis represents the numbers as they would have to be adjusted for 3.0% GDP over the period 2007-2012.--------------2008----2009----2010----2011----2012

There has been exactly one five year period since 1960 with average Real GDP of 2.4. Two years of growth at trend would put us at a point where all future five year periods were bleaker than anything in the past. Now current forecasts generally call for a dismal 2008 so this process might not kick in right away. But whether you start in 2009 or 2010 growth at historic trend grinds crisis down to nothing in a short period of time.

There have been three five year periods below 2.8% since 1960, and six above with a range from 2.4% to 5.0%. This would have to represent a fairly pessimistic outcome, particularly coming off a 3.3% 2006 number

The vertical axis has the Intermediate Cost alternative projections given in the 2007 Report for the years from 2007 to 2016. The horizontal axis represents the numbers as they would have to be adjusted for 2.8% GDP over the period 2007-2012.--------------2008----2009----2010----2011----2012

Okay nobody is currently projecting 3.3% GDP growth in the short term. On the other hand this is in fact just under the 3.4% Real GDP average of 2004-2006. It is not crazy talk.

The vertical axis has the Intermediate Cost alternative projections given in the 2007 Report for the years from 2007 to 2016. The horizontal axis represents the numbers as they would have to be adjusted for 3.3% GDP over the period 2007-2012.--------------2008----2009----2010----2011----2012